Chinese Trade Surplus Will Never Die (?)
So you say – we have entered a global recession, maybe even a
depression; surely the Chinese trade surplus will wither as western
import demand shrivels up. The first report is in. We have a new
record! In October the surplus reached $35.2 bn.. In fact export
growth did weaken from a rate of 21.5% year over year to 19.1% but
incredibly, import growth collapsed from a rate of 21.3% to 12.4%.
Specifically the trade surplus with the US rose 13.3% year over year. It is easy to
argue that Chinese goods that feed through say Walmart into the US can
not be replaced by US production and in fact are necessities that will
be bought even if the economy tanks. I find neither one of these
arguments to be very compelling but the swing factor here is NOT our
imports which are down a little and acting as they should. I would
expect to see further declines here as the economy falls further. The
real story is (US) exports.
The published growth rate of the Chinese
economy has declined from 10.1% to 9%. How does such a small decline
in the rate of GDP growth drive such a massive instant drop in
imports. There are precious few explanations of this in the press
beyond the countless anecdotes about their economic malaise. Could
their economy be so addicted to exports that any decline in exports
triggers a collapse in domestic demand? If that’s true then the GDP
figures are being produced in a Chinese Disneyland.